February 09, 2015 by Nancy Ling
In a previous blog post, I wrote about the pros and cons involved with owning assets in joint tenancy. One of the highlighted reasons for owning property in joint tenancy was for estate planning purposes in order to ensure that the property passed immediately to the surviving owner.
If you hold property in joint tenancy with the intention that, when you die, property will pass automatically, by right of survivorship, to the surviving owner, without the requirement of probating the deceased’s will, you need to make sure that you have set up and documented your intentions properly.
Occasionally, when one joint owner passes away and the survivor looks to take over total ownership of the asset, for example a house or a bank account, they find themselves faced with an allegation that the property wasn’t a “true joint tenancy”. This is particularly the case when a parent holds property in joint tenancy with a child, and the parent contributed most of the money to acquire the asset.
When a parent acquires and pays for an asset, for example a house, and puts a child on title as a joint tenant, that joint tenancy is open for attack. It becomes a question of what the deceased intended. Someone, usually a spouse or another child of the deceased, could make a claim in court that the deceased did not intend to make an outright gift of that property and therefore the house should go back to the estate and be divided up according to the deceased’s will.
The basis for this argument is that if the parent did not intend to gift the house to the child, then the child only held their interest in the house in trust for the parent; this is called a resulting trust. A resulting trust requires that the person holding the property in trust return it to the person who gave it, or to their estate.
The courts presume that people do not generally make gratuitous transfers of property, or give things away for free. Therefore, if you put your house into joint tenancy with your child with the intention that they would inherit it by right of survivorship, and your child did not contribute towards the purchase price of the house, you must leave proof that it is in fact your intention to make such a gift of the house. This is generally done with a Deed of Gift.
It is not a good idea to let your family members try to discern what your intentions were after you have passed away. Instead, you should document your reasons. If you are using joint tenancy as an estate planning tool, especially with your children, get some professional advice and make a deed of gift setting out your clear intention to make such a gift.
Nancy Ling is a lawyer with FH&P Lawyers. She can be reached at firstname.lastname@example.org or (250) 448-0527.